Friday's range contracted from the prior few days after the huge rally off the 09/29 lows. The underlying market has been driven by the Energy and Materials sectors mainly, which have heavily underperformed and seen a short squeeze with the jump in Oil back to $50 from $40.
We can see below that the market is balancing near the top of the range. Longs still have the upper hand and I would expect to see an attempted breakout at least. Note the 2020 pullback high in August where we may see responsive sellers step in ahead of.
The rapid short squeeze has taken a lot of the buying power out of the market so I'm expecting a two-sided week as shorts try to press below into the weak structure and gaps formed on the rise. Longer time frame longs may be looking to buy on dips and not chase prices too much up here. Short term, we may see an attempted break higher to run stops followed by aggressive selling back down to the top of value of the range. If prices push and hold above 2020, we may see continuation of this rally back up to the high volume levels above.
Friday's RTH trade left a poor high, which is likely to be revisited as stops above the top of the range. If the market can trade and hold below Friday's low, we could see a liquidation break through the area highlighted and potentially down to the naked VPOC/POC from 10/08.
The week ahead for US data is here